No doubt that at one time or another, you received a friendly reminder from your association’s attorney that your community is delinquent with the Secretary of State (“SOS”) filing or that you need to register with, or update, your DORA (Department of Regulatory Agencies) registration.
It has been our experience that in many instances, these two types of registrations are viewed as one and the same, and as long as an association has registered with either DORA or SOS, there is no need to register with the other. However, this is not accurate—registering with DORA is a completely separate and different process than registering with SOS, and each registration serves a different purpose.
Other times, these registrations are believed to be optional and not legally required, but this is also an incorrect assumption, as both registrations are required by law, and in fact, they are required by two different statutes.
To help you understand the significance of these registrations, as well as differentiate between them, each type of registration, and its purpose, is discussed in this article.
Secretary of State Periodic Reports
Most associations in Colorado are created as nonprofit corporations, which subjects them to the Colorado Revised Nonprofit Corporations Act (“Nonprofit Act”). The Nonprofit Act governs all nonprofit corporations in Colorado regardless of whether such corporations constitute homeowners’ associations.
To legally create a nonprofit corporation in Colorado, articles of incorporation must be drafted and filed with the SOS. Additionally, each nonprofit corporation is required to annually update its registration with the SOS by filing a periodic report. What does that look like? Filing a periodic report merely requires a representative of the corporation to go onto the SOS website and confirm the name, principal office, and address of the corporation have not changed, or if they have changed, to update the information. As you might imagine, there is also a fee associated with filing a periodic report.
If corporations fail to renew their registrations with SOS, they are deemed “delinquent” and are subject to additional late fees and penalties. Additionally, delinquent corporations are prohibited from maintaining any court proceedings for debt collection until the delinquency is cured.
If a corporation fails to cure its delinquency for three years, it will be administratively dissolved, which means the corporation is prohibited from carrying on any business. Once an association is administratively dissolved, it will need to be reinstated by filing articles of reinstatement; it will also need to ensure the name of the corporation is still available.
If the name is no longer available (i.e. it is being used by another entity), the association must come up with a different name altogether, which could create complications due to the mismatching names in the governing documents of the association.
In short, it is imperative for associations to stay current with their SOS registrations as failing to do so, will lead to an inability to collect assessments or to function as an entity, if dissolved.
Unlike SOS registrations, which are required by the Nonprofit Act, DORA registrations are required by Part 4 of CCIOA (Colorado Common Interest Ownership Act), and have nothing to do with an association’s designation as a nonprofit corporation. The DORA registration requirement is only applicable to common interest communities, as that term is defined by CCIOA, and not to any other nonprofit corporations.
This requirement was added to CCIOA in 2011 for the purpose of creating a list with DORA of all common interest communities in Colorado. As with the SOS registrations, associations are required to update DORA registrations annually and pay a fee. DORA registrations must identify the association’s name, the management company or designated agent, a physical address, an email address, and number of units in the association.
So, what happens if an association fails to register, or update its registration, with DORA? Such association will be suspended from filing and enforcing liens against properties in the community or taking enforcement action against owners until such time as the registration is properly filed or updated. Furthermore, if an association has an active action against an owner at the time its DORA registration expires and is not renewed, such action will be suspended.
Thus, failing to register with or update the DORA registration could have a huge impact on an association’s ability to perform its statutory duties and therefore exposes the association, and board, to liability.
Should you have any additional questions about DORA and SOS registrations, please contact an Altitude attorney at (303) 432-9999 or at [email protected].